Wellbeing Index shows impact of jobless on society

A sharp rise in the rate of long-term unemployment is taking a growing toll on Australia's collective wellbeing.

The Herald-Lateral Economics Wellbeing Index - which uses a range of indicators to measure changes in national welfare - shows the annual cost of long-term unemployment to collective wellbeing has reached $3.3 billion.

The report says the average rate of long-term unemployment has doubled since 2008 from an average of 0.6 per cent to 1.2 per cent.

At the beginning of last year 120,000 people had been out of work for 12 months or more - the definition of long-term unemployment - but that number had risen to 170,600 by the end of March, an increase of more than 50,000.

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One negative effect of long-term unemployment is skills atrophy - when skills are lost due a long period without a job. The longer a person is out of work, the more likely it is that their skill set will begin to deteriorate through lack of use and training.

The index calculates the wellbeing cost of skills atrophy was $1.4 billion during the March quarter alone, 14 times higher than the average.

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The long-term unemployment rate has been increasing at a faster pace than the total unemployment rate since the depths of the global financial crisis in 2008.

"The steady increase of long-term unemployment has not been receiving substantial attention," the report says.

The overall result of the Herald-Lateral Economics wellbeing index - which provides a broader measure of wellbeing than traditional economic indicators - was a decline of $1.2 billion in the March quarter. It was the index's third consecutive quarterly fall - the last time that happened was during the global financial crisis.

While a strong rise in national income made a positive contribution to wellbeing in the quarter that was offset by the worsening rate of long-term unemployment and a decline in the proportion of adults with formal education although the report warned that recent data on adult education had been "noisy."

The index's decline suggests that national wellbeing is lagging gross domestic product. Official figures released on Wednesday showed GDP rose by 1.1 per cent in the March quarter for an annual growth rate of 3.5 per cent.

Index author Dr Nicholas Gruen said the true cost of long-term unemployment was not captured by traditional economic indicators like GDP.

"Long-term unemployment causes huge social and economic damage," he said.

"The results show that in this quarter, increased long-term unemployment cost the economy around one sixth of the costs of the recent Queensland floods."

High rates of obesity and untreated mental illness have been significant drags on the index. The cost of obesity to Australia's collective wellbeing was $122.6 billion in the year to March 31, an increase of 6.2 per cent. The annual wellbeing cost of untreated mental illness reached $192.4 billion, up 2.2 per cent on the previous year.

The index's measures of life expectancy and preventable hospitalisations continued to slowly improve making a positive contribution to overall wellbeing.